Thanks to Larry 'ample arse' Barker and Peter 'whinging prick'
Souter - rival Omnicom mudslingers - for providing the Diary page levity
in a week where worries over the economy run like a thread through the
But where to start with the doom and gloom? How about WPP's share price
dropping 56p on Tuesday, the Bcom3 Group deciding against a flotation
this year, more layoffs at US agencies, the upcoming election and
foot-and-mouth sparking spending jitters among UK clients, ITV reporting
falling ad revenues. How should agencies react?
First, you could make the case that the recession is more psychological
than real. The roaring American economy has been weakened but it is not
technically in recession (defined as two consecutive quarters of falling
output). Far from spending paralysis in the UK, it turns out that there
are several sectors where adspend has been growing in the past three
months relative to the same period last year. For example, finance is
growing at 33 per cent, ahead of 2000's 27 per cent. Adspend for
business and industrial advertisers (utilities, telecoms, etc) is up 15
per cent, a nudge up from 2000's 14 per cent. Travel is up 7 per cent
rather than down 4 per cent.
Second, thanks to the IPA's body of Advertising Effectiveness case
studies, and to its more recent collaboration with the benchmarking
specialist PIMS Associates, agencies have ample evidence of the
long-term value of advertising to brandish in the face of the most
jittery client. BMW, Andrex, Gold Blend, PG Tips, they are all
Looking at how companies have behaved towards advertising during a
recession, PIMS examined the profitability of 183 UK companies which had
experienced general or industry-specific recession, grouping them by
whether they had cut or increased their adspend.
The results showed that 110 of the companies chose to cut adspend in a
recession, 53 to maintain it and only 20 to increase it. But those
businesses that increased adspend were more profitable during recession
than those that had cut or maintained it. Once recovery had started,
businesses that had maintained or increased adspend made the fastest
And those that increased adspend increased their market share faster
during recovery than those that did not - nearly three times as fast as
the advertising cutters.
A cynic might add here that upcheering IPA reports are all well and good
but chief executives everywhere live and die by their quarterly earnings
and that is what Wall Street and City analysts measure them by as they
talk down the share price. A slowing economy turns clients into
quarter-to-quarter worriers rather than long-term thinkers and
advertising is going to have to shout louder than ever to make its voice
heard in boardrooms.